Indoco Remedies Limited (INDOCO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Conference Call of Indoco Remedies Limited, hosted by Nirmal Bang Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Manchanda from Nirmal Bang Institutional Equities. Thank you, and over to you.

Thank you, Rituja. Hi, good afternoon, everyone, and welcome to the Q3 FY '21 Earnings Call of Indoco Remedies Limited. We thank the Indoco management for giving us an opportunity to host the call. Today, we have with us the senior management of the company represented by Mr. Aditi Panandikar, Managing Director; Mr. Sundeep Bambolkar, Joint Managing Director; Mr. Mandar Borkar, Chief Financial Officer; and Mr. Vilas Nagare, President, Corporate Affairs and M&A. Over to you, sir.

Good afternoon, all the participants. Hope you and your family members are all safe and healthy. Let me begin first with the business highlights. Net revenues for the quarter grew in double digits by 17.6% at INR 333 crore against INR 283 crore. And for the 9-month period ended December '20, revenues grew by 13% at INR 923 crore against INR 816 crore. EBITDA to net sales for the quarter is 18% at INR 60 crore compared to 12.4% at INR 35.10 crore. And for the 9-month period, the EBITDA is 18.3% at INR 169 crore compared to 11% at INR 90 crore. PAT to net sales for the quarter is 7.5% at INR 25.1 crore compared to 3.3% at INR 9.3 crore. And for the 9-month period, PAT is 7.3% at INR 67.5 crores compared to 2.3% at INR 18.9 crore. Now on to Domestic Formulation business. As per the Avax December '20 data, IPM stands at INR 39,484 crore, with a growth of 6.4% during the quarter, and INR 109,086 crore with a growth of 0.9% during the 9-month period. Indoco ranks 29th in the IPM with market share of 0.63%. The source for this information is Avax. As per SMSRC, the number of drug prescriptions for the period November/December '20 for the IPM has degrown by 13% compared to the same period last year. Indoco ranks 24th with a prescription share of 0.74%. Revenue from Domestic Formulation business for the quarter degrew by 11.7% Y-o-Y. For the 9-month period, revenue degrew by 8.8% at INR 480 crore as against INR 526 crore. At the Pediatrics Conference and Awards 2020 organized by CIMS Medica India, the company's brand, Kidodent, received the Most Trusted Pediatric Toothpaste for Regular Use Award. The virtual event was held on 21st November 2020, and was attended by key dignitaries from medical fraternity. During the quarter, 3 new products were launched, mainly Fevindo-800 tablets, that is favipiravir; Poviclean Gargle, Povidone-iodine; and Zmun CD tablets, multivitamin. On to the international business front. Revenues from international business posted a robust growth of 72.6% for the third quarter. For the 9-month period, revenues grew by 66.4% at INR 360 crore as against INR 217 crore. Regulated markets grew by 86.3% Y-o-Y. For the 9-month period, the revenue grew by 87% at INR 295 crore as against INR 158 crore. Revenue from U.S. business for the quarter are at INR 45 crore as against INR 16 crore. And for the 9-month period, the revenues are at INR 115 crore as against INR 30 crores. The company has dispatched the launched quantities of 1 ophthalmic and 2 injectables to U.S. during the quarter. Indoco has also received U.S. FDA approval for an injectable ANDA, and the launch quantity of the same will be shipped soon. Revenues from Europe business for the quarter grew by 45.1% at INR 66 crores as against INR 45 crores. For the 9-month period, the revenues grew by 38.7% at INR 170 crore against INR 122 crores. The company won major tenders in Germany, including AOK for allopurinol tablets worth INR 140 crores. The revenue expected from this business is INR 70 crore per annum. The company is vertically integrated for allopurinol API, the captive consumption of which will be equivalent to 100 metric tonnes per annum for supplies against these tenders. Revenue from South Africa, Australia and New Zealand for the quarter is at INR 6 crores as against INR 1 crore for the same quarter last year. For the 9-month period revenues are at INR 10 crore against INR 5 crore. Revenue from emerging markets for the quarter grew by 30.6% at INR 27 crore against INR 20 crores. For the 9 months period, the revenues grew by 11.3% at INR 66 crore against INR 59 crore. During the quarter, revenues from API business grew by 55.3% Y-o-Y. For the 9-month period, the revenue grew by 12.6% at INR 74 crore as against INR 66 crore. Revenue from CRO and analytical services for the quarter was flat at INR 3 crores. For the 9-month period, the revenues grew by 10% at INR 8 crores as against INR 7 crores. The Indian Patent Office granted 2 patents for Indoco's formulation manufacturing processes. First, a novel organogel composition for oromucosal drug. Indoco is currently using this novel process in the manufacturing of 2 of its brands, namely Rexidin-M Forte Gel and Duestom. A stable gel-forming solution of timolol maleate, Indoco intends to use this formulation in its domestic and ROW markets. With grant of these patents, the company has 38 granted process patents, out of which 21 are of API manufacturing process and 17 are for formulation. That is all about the business highlights for the third quarter. And I now request the participants to put up their questions. Thank you.

[Operator Instructions] The first question is from the line of Sudarshan from Sundaram Mutual Funds.

Congrats on the great set of numbers. Ma'am, my question is on the domestic business. While I think we have done very good on the export side, I mean on the domestic side, we are a little disappointed because we were expecting that on a Q-on-Q there should be some kind of an improvement. If you can give some color with respect to anti-infectives, gastro and ophthalmology, which has a higher -- which occupies a higher percentage of your overall domestic side? And also, if you can give some color with respect to the larger brands, because I think the products like Febrex, I mean, has not really kind of seen any kind of a growth. I mean one is looking at it from a Q-on-Q basis also, it's not as kind of improvement as what we expected, like Febrex, Oxipod has really not kind of -- or even Cyclopam for that matter. So if you can give some color with respect to some of these therapy area some of the larger brands, I mean with respect to when we can see somewhat more normalization? And what kind of plans do we have to push sales? Or is there any way where we can bring additional sales?

Yes. Right. So as you correctly identified, we -- 2 of our key brands, Febrex Plus and Oxipod have heavily degrown, not just in this quarter, but even in the earlier quarters. I think you have 2 questions. One is why sequentially we could not show higher growth than Q2? And the second one was about the bigger categories products, how are other products are faring? So first, to answer your question. On a month-on-month basis, if you look at the trajectory of most of the therapy areas, you will see that we are doing better than the month before in lockdown. However, having said that, it is true that we have not been able to post growth over Y-o-Y in this period. And the 2 categories of products -- for our products, which has let us down, one is anti-infectives and the second is respiratory. Both these therapies have not done for the covered market as well. For the third quarter this year, the respiratory category has degrown by 12% for industry. We have degrown by 3% here. Anti-infectives also, if you take out the impact of favipiravir and some of the antibiotics that have been used for COVID-related illness. Other than that, anti-infectives are also heavily degrowing. And that's how Oxipod has got impacted. We are confident going forward, as things open up and -- essentially, it is the use of masks which has caused a great amount of fall in any kind of respiratory and other ailment. Increased hygiene conditions, work from home, eating at home, all those have been responsible. So our acute categories have got impacted, and which is why we -- the domestic business has sort of shown the minus 11% this quarter. Some of our other categories and products, you specifically asked, Cyclopam is one of the key products which had got impacted in lockdown, but is showing good trends of recovery now. Same is the case with the product like Cital. The dental products are also doing quite well. And for the third quarter, we have grown at twice the rate of the covered market in stomatologicals. So as such, there are good indications that the -- that we shall do well in domestic. However, we stay, to a certain extent, impacted by what is happening in the covered market and by the demand for these products. I hope that answers your question?

Yes, Ma'am. And in terms of specifically these therapies like ophthalmology, dental, I mean because of the fear of COVID, I mean are we seeing better traction and better footfalls?

There is improved traction and improved footfall. And incidentally, ophthal is one of the category which is ramping up much faster than all the others now. So I expect ophthal, dental, in fact, some of the other subchronic spaces also to do quite well, like gynec. These should pick up first. The acute therapies will lag behind a bit from a growth perspective.

And specifically with products like Febrex and Oxipod, given that the last few months it has been much lower, is it primarily because of COVID or is there any other issues with respect to these brands, Ma'am?

No, there are no other issues. Primarily the season for these products is Q2, which did not come in this year because of lockdown. So Q3 generally is lower than Q2 even under normal circumstances. This year, as I said, use of mask, better hygiene conditions, generally people have not got impacted by respiratory ailments. So most products in the respiratory segments: cough, cold, decongestants and antibiotics used for upper respiratory tract infection, like most of the [ cefa ] molecules, they have not done well. And Oxipod and Febrex Plus fall in these categories.

Sure. Ma'am, 1 question on the cost is, if I look at it on a Q-on-Q basis, the other expenses is lower, so is your staff cost. Our belief was that the sales will kind of come up and the costs will kind of come off. It looks like either of them have not happened. So any view on the cost side, ma'am?

Yes, yes. Costs related to India business have gone up marginally, as was expected. That -- as the costs are not coming back and therefore the top line is coming back is not a correct correlation to make. Whatever needs to be done for India business by way of increase in travel and/or advertising as is required based on what we can do given how conditions are opening up is being done. And we are confident, therefore, that the top line will come back when the conditions get corrected. Yes.

Yes. And with respect to the injectable products, we should see a ramp-up from the fourth quarter, right, I mean, for the U.S. business?

Yes. Yes.

The next question is from the line of Aditya Khemka from InCred Asset Management.

So the first question is on the India business, Aditi ma'am, as you said. So as the represented market has also not done well, so in terms of market share, are we flat Q-o-Q, are we up, are we down in the represented molecule market share?

We are marginally higher.

Okay. So we are gaining market share in the represented molecule?

Yes, yes. Most of them.

And that stands for citalopram, that stands for Febrex and that also stands for Oxipod?

Yes, Cyclopam and Febrex Plus. Oxipod, we are in the top 6 brands of cefpodoxime. And the market leader is doing better than the rest of us marginally.

Understood. Understood. Fair enough. And on the litigation that we were engaged in for the India business, some products we were sort of in litigation with the innovator regarding the IP, could you update us what is happening there?

It has not really moved. There were a couple of hearings where nothing happened. And status quo continues. A new date has been given. We're still hopeful.

Right. Does the delay in solving the litigation also limit our opportunity window? Or does it not impact that?

No, it will not limit our opportunity window. There are other molecules expected to come off-patent in this category a little later. But the biggest factor here is the innovator product and how good it is from safety, efficacy perspective, and that market will stay.

Understood. Now to the U.S. business sales, which has done exceedingly well, so does this include milestones from the product approvals and launches that we have done?

Yes, yes. As discussed in the last call also, Aditya, typically the amount of proportion coming from milestones and total sales is almost constant for all the 3 quarters.

And it is 50-50 almost? Or?

No, no, no. It's much lower. I think -- how much is U.S. this quarter?

Out of overall total export sales, if you want to understand in terms of dossier and all, it's hardly INR 18 crore, which is like a profit share...

For the quarter, only INR 18 crore comes from milestones, which we also call dossier income internally. Okay?

Right. Right. Right. Okay. Okay. Understood. And just 1 last question on the cost structure. So given that the costs are marginally lower sequentially but the India cost has normalized, so is it the freight cost on the export side that is coming down? Or what cost is coming down?

India business, all costs have not come back, Aditya. And like I expressed earlier, many areas of the India business, we are actually looking at bringing in more efficiency. So some costs are likely to get postponed forever, let's hope that. Regarding on the international front, it is more a number of -- game of numbers.

Sundeep. Yes. Yes. It's more -- since the volumes have gone the plant costs were optimized. Freight is, I think, constant.

In fact, it is a little up.

Yes, freight is constant or marginally up. So we are not getting any advantage of that.

Coming to cost of goods, if you look at the Y-o-Y picture, the absolute amount of milestones collected in Q3 this year would be higher than same quarter last year. And that would impact the cost of goods.

Understood. So that impacts the cost of good favorably?

Yes.

Right. And also on your production, so now you have a lot of PPA capacity given the Patalganga expansion. So what percentage of production is vertically integrated, i.e. focused on the export side. Domestic, I don't really care that much. But on the export side, what percentage of our production is actually vertically integrated.

Close to 80%.

8-0, okay.

Yes.

The next question is from the line of Charulata Gaidhani from Dalal & Broacha.

Congrats on the good set of numbers. And yes my question, does the Europe sales include allopurinol?

Yes. Yes. Yes.

Okay. And in terms of U.S. supplies, could you name the injectables that we have supplied?

Actually, we cannot at this stage. But we have been making periodic press releases whenever we got approval, at least when it is our own product. Yes.

Okay. So the 2 injectables are your own or for contract?

Some are contracts, some are our own.

Okay. Okay. And there is 1 injectable that has been approved that will be shipped in the current quarter?

Yes.

Yes. Yes.

Okay. That is your own or?

Customers.

Okay. Okay. And in terms of lower interest and depreciation, have you repaid some debt?

Yes.

Yes.

Yes. You'll be happy to note that between December '18 and December '20, we have repaid almost INR 50 crore long-term debt.

Okay. So how much is the gross debt?

Short-term debt, of course, fluctuates between INR 120 crore and INR 140 crore.

Okay. What is the current level of gross debt?

Gross debt is around INR 285 crores.

Okay. And cash?

Cash?

3 -- INR 2.5 crore to INR 3 crore kind of thing. Cash balance is, no, you're talking about? It's marginal.

Yes.

Short-term rates are also coming down, if you notice. That's also -- short-term rates are also sequentially coming down every quarter since last 3 quarters. So that has also contributed to the lower cost of finance.

The next question is from the line of Deepan Narayan from Trustline PMS.

Congrats for good set of numbers. Aditi ma'am, as you explained, this Domestic Formulation, so when are we expecting recovery basically on anti-infectives and also other segments, acute division?

Yes. So we keep our fingers crossed. As such, now that vaccines have come in, I guess it will give people more confidence to step out of their homes and more normalcy is likely to return. With that, I am hoping acute segments will gradually come back. As such, as I already said, in the first 2 quarters, we were taking a lot of [ flak ] from most of our key products. But in Q3, we have seen a good recovery of Cyclopam, and in Q4 I expect it to further get better. Now we are just -- lagging behind just for 2 products, one is Febrex Plus, which is typically used for blocked noses, for congestion, pollution related, allergy related and when the season changes. And for OXIPOD, which is a cefpodoxime antibiotic used for upper respiratory tract infection. So both of these have a seasonal element to it also. Typically, Q2 is season for these products. So for kind of peak products -- peak sales of these products, I guess we would have to wait for second quarter of next year. But otherwise, Q-o-Q kind of numbers we should be able to -- I'm sure the first quarter next year, we should be able to do better.

Okay. Okay. Okay. Also, can you provide some guidance in terms of next year how it will be looking for domestic, U.S. and European market for us?

See, India business YTD is minus 9% right now. And considering whatever we have seen over the last couple of months, I don't expect it to change too much for the whole year basis. So this year, we can safely say India business will be down by 8% to 9%. And from there, we must expect a minimum 15% growth next year.

Okay. Okay. Okay. And what about U.S. and European markets?

U.S., this year we'll do close to INR 150 crore; and we should do INR 220 crore, INR 225 crore next year, about. Europe, we'll grow at around 25% to 30%.

Okay. Europe, earlier we have guided for some INR 225 crore for FY '21. Now with this increased order, it will increase further, right? Or it is factored in?

I think we factored in when we said INR 225 crore this year.

Yes, yes.

We will take the 25%, 30% growth of it can be expected.

The next question is from the line of Rashmi from InCred Research.

So a little bit more clarification on the domestic side. Are we seeing any competition or any market share loss in the stomatological therapy? Or we are still the most prescribed brands in this therapy?

Most prescribed. No loss of market share.

Okay. Okay. And ma'am, on the cost front, you said that the cost would be expected to get postponed further. So is it safe to assume that quarter 4 also we will see the similar kind of other expenses and all just like quarter 3? And it would be in that range only? But what about FY '22? Is it something that then all the marketing and promotional expenses and everything will come back, everything will get normalized and this is going to go up like FY '20?

Not entirely like before. But yes, it will inch up.

Inch up in the sense, now currently I think more or less we are in the range of 26% of sales. So fair to assume that at least 100 to 200 basis point inch up can happen in the next year?

Yes.

Okay. And ma'am, on this allopurinol tender, this allopurinol for Germany, it would be supplied from which facility?

Goa Plant-I and III.

Goa Plant-I and III. So what I understand that from Plant-III, we were already supplying it to the U.S., right? And I think...

Yes, yes. We are also making for Europe. We are also making from one of the Baddi sites.

From one of the Baddi sites. So it would be supplied from I, III and Baddi plant -- the new Baddi plant, right?

Yes.

Yes. Yes.

Okay. So what I want to understand that in the U.S., allopurinol used to contribute around $1 million, right? So it is at the same level or the supplies to U.S. have come down and now we are focusing more on supplies to Germany? I mean the production is used to bear -- it is used for Germany.

Rashmi, these are 2 different markets. So German tender which we have won is entirely for the German territory. And our U.S. supplies are totally different. So right now, we are in the range of $1 million and marginally it might go up.

Marginally, it might fall, you are saying?

No. Go up. Go up.

See one is not coming at the cost of the other. That's not how it works.

Okay. So that means it is basically stagnant in the U.S., right? That is not affected?

Generally when you make supplies, you make enough for a couple of quarters and then you get the next order. So that's how it is. So if you study Q-o-Q, you may feel like that; that one is going down and the other is going up. But annual basis there is nothing like that.

Yes, it will go up finally.

Okay. And this supplies to Germany has already started in this month, right?

Barely, this last month, yes.

Yes.

Okay. So basically, when you're saying that INR 70 crores supply, it would be calendar year '21 and '22?

Yes, yes, yes.

Okay. And ma'am, what about the margins from this kind of tender? Is it like very competitive? And is it below company level margins or they are much better or equal to the company level margins, the current company level margins?

They are equivalent to company level margins, I would say. And it -- you cannot generalize, if you are asking for this one specific product. We have vertically integrated on it with our own API. And that is how we can do it at decent margins, okay?

Okay. So specifically for this Germany market supply, I'm asking whether it is in the -- whether it is equivalent to or it is slightly below the company level margins?

Equivalent.

Equivalent to it. Okay. Okay.

[Operator Instructions] The next question is from the line of Sajal Kapoor from Unseen Risk.

Sundeep, sir, in a recent webinar hosted by ICRA, you sounded very positive on the emerging CDMO opportunity for many Indian companies, including Indoco. So my question is with an integrated CRO and a strong R&D setup and synthesis capabilities and complex sterile injectables and ophthalmic nanosuspensions, we have MOPS, we have pulsatile drug delivery and so on, we should be able to scale up innovator and partner synthesis quite meaningfully, no?

Yes, yes. Not necessarily innovator companies. I was talking about the large generic companies in the U.S. who gave a lot of opportunity to Indian companies to go ahead for contract research in terms of development of complex ophthalmic, complex injectables. That's the story I spoke about.

But if you are asking about whether these capabilities can be used to work with innovators, as such, on paper, it is the same. And if you asked me about a decade ago or more than that, there used to be clear markets of innovator and generic. In the last few years, this has really become a very thin line. So both kinds of companies work with each other. So from a capability perspective, what you said is correct. From capabilities on clinical research, doing BE studies, product development and even custom synthesis in API, we have all the capabilities.

Yes, ma'am. So exactly that's my question. When we have all the capabilities, I mean, why are we not aggressively pursuing that path? And do we have the capacity to address that sort of opportunity? Because, see, what happens is we have to think 4, 5 years out for this. So it takes a couple of years to design and build a new plant, then the validation batches and then the qualification, et cetera. So all this from start to going commercialization takes 4, 5 years. So we have to think for 2025 and beyond growth today.

Right, right, right. Yes, it's a good perspective to bring in.

Yes, definitely.

The 2 kinds of -- lines of business are very different, though. And the kinds of risks that are taken also on both businesses, if you partner with generic versus if you partner with innovator, are also entirely different. But certainly something for us to consider going forward.

Sure, ma'am. We look forward to some further updates in ensuing quarters on that one. And secondly, ma'am, COVID seems to have disrupted us more than our smaller sized peers as far as the domestic business is concerned. So I mean is it because we could not leverage or effectively adapt digital and online channels as effectively as some of our smaller competitors had?

No, it is more a play of how large some of the products which were impacted were, for us in particular. So if you look at the top 4 segments for us in India business: number one is stomatologicals, number two is anti-infectives, number three is respiratory, and four is GI. And other than stoma, all 3 got impacted. So it is more a case of the product basket which got impacted having a very high proportion of sales for Indoco compared to some of the other companies. This is what I have to say, to be honest.

No. I agree with that, Aditi ma'am. But even if it is pre-COVID, so let's take the quarter ending December 2019, when there was no COVID, our sales force productivity was one of the lowest, and that has been a pain point for us for quite a few years now. When can we expect our field force productivity to sort of at least improve and not be at the rock bottom as far as the peer group is concerned?

Today, our field force productivity is close to 2.5. And I expect it to inch up towards 3 in the next 2 years.

Right. So we were 2.4, today we are 2.5, and we expect to go to 3 by the end of FY '23?

Yes.

Okay, sure. And finally, if I could just squeeze in a couple of product-specific questions. So how has been the traction on dorzolamide in a world where almost everyone is kind of working remotely in a Zoom-enabled digital world. We naturally expect some traction on the ophthalmic and products like dorzolamide, et cetera, no?

We are -- we do not have dorzo in India as a brand. And internationally, we have just got the product back from Teva. So we are yet to launch it. If you ask how have ophthalmic taken off in India? Compared to much of the other segments in ophthalmology, the tear substitutes have done better. And in our case, a product like Irivisc has done quite well very compared to most of the ophthal products. So to that extent, computer vision syndrome, as it is called, has impacted people and there is higher consumption of products like tear substitutes, Irivisc, which is one of our brands.

Sure, ma'am. And finally on the olanzapine, the approval came about 6 months back, I think, August last year. So any traction on that as well as some of the first-to-file and Para IV opportunities you spoke about previously?

We expect to launch in April, olanzapine.

Okay. And, first-to-file and Para IV, are they imminent launch this quarter, next year...

Which one? Those are much bigger.

First-to-file and Para IV.

Yes. Some of the first-to-file will come up later for launching; not now.

Sure. And do we expect to continue with this INR 50 crore to INR 60 crore annual spend on the R&D side? Or is it likely to increase given that we are pursuing more complex formulations and...?

Yes, it will marginally increase, but we should be able to maintain our percentage of sales.

The next question is from the line of Charulata Gaidhani from Dalal & Broacha.

My question pertains to how many products are there in the U.S. today? And what is the status of repeat orders?

In the U.S., we have 18 approvals, out of which 10 are already there in the market. And we have 29 products pending for approvals.

Right. Now are you getting repeat orders? And what is your frequency?

Yes, repeat orders take a quarter or so. So we have just started supplying. And it is ongoing kind of a thing. So we are getting repeat orders for the product which we have supplied a quarter or 2 quarters back.

Charulata, our forecast for U.S. as a top line are based on this kind of orders in hand and the picture that we are seeing for U.S.

[Operator Instructions] The next question is from the line of Rashmi from InCred Research.

Just want to understand on API business. This quarter was exceptionally strong in terms of domestic API. So have you got some, like, exceptional supplies have we done in this quarter? Or this will -- and how do we look at it overall?

Right. So when it gets classified as domestic API, it simply means that if we are not earning in foreign currency. So this is being supplied to other Indian players who are using the APIs for their exports. That is the key trigger, yes?

Yes. But what I want to understand that this time, this quarter, the supplies were very high. So how do we look at it? Is this the new normal? Or it is this one time?

No, no, it's not one time. API will continue to do well. Like I said earlier, we primarily -- the first customer for API division is the internal -- international formulations of the company. So in a particular quarter, they can get impacted for top line sales from external depending on how much capacity they have to sort of reserve for internal use. That's all. So in this quarter, possibly they could sell more outside. This is what has happened.

The next question is from the line of Rahul Sharma from KARVY Capital.

What is our debt currently, gross debt?

Total debt is, as I said, INR 285 crores, of which working capital debt is INR 139 crores.

Okay. And how much do we -- what is the target for the year-end, sir? And for FY '22?

Long-term debt we'll be retiring quite a lot in this year. I think from INR 145 crores, it should come down to INR 125 crores by year end.

Yes. The target is to every quarter sequentially reduce it. You might have observed in the last 6, 7 quarters, there has been a reduction of about INR 25 crore to INR 30 crore. Of course, the short term, this trend will continue, this -- which has happened compared to the earlier quarter. It's about INR 20 crore plus. So maybe INR 5 crore here and there it will happen, but...

Depending on the business needs.

Okay. So FY '22 long-term debt further will go down to INR 100 crores, am I right?

INR 115 crore kind of thing. INR 115 crore to INR 120 crore, it should happen.

[Operator Instructions] The next question is from the line of Vishal Manchanda from Nirmal Bang.

I just want to understand what is the status of the approved ophthalmic ANDAs that Teva was supposed to transfer back to Indoco? So when should we expect the launch of this ophthalmic ANDAs?

So 2 products have been handed over and are back with us. These are currently under revalidation and preparedness for launch. And there are at least 4 other at various stages of discussion and handing over.

How many others? 3 others?

4.

4 others. Okay. So these are approved ANDAs, the 4 others which are pending?

No, no, no. They are not approved. I think 2 are approved and 2 are pending.

Okay. So would -- how long would you take to launch this 2 ANDAs?

First quarter of next year.

Yes, first quarter of next year we can expect.

The launch.

Okay. And so you would seek a new partner to launch these ANDAs?

Yes, yes.

Right. And any complex approvals that you would expect in FY '22?

Yes, there are a couple. We will guide you in the -- because we are expecting some kind of audit to happen for that to get cleared. So once FDA comes on audits, we'll be in a better position to commit.

Is there a routine inspection also there for any of your facility, Unit 1, Unit 2, Unit 3?

Not really. We have asked -- invited U.S. FDA to come down for Plant-I so that the warning letter can be cleared. Other than that it is mostly for product approvals.

So is the -- are these oral solid launches, like olanzapine, febuxostat, are these not happening because there's a warning letter on those...

No, no, no. They are from the other plants. And they have nothing to do with either warning letter or even prior approvals. They are simple products, and olanzapine is going to happen in April. Febuxostat has already been launched.

It's already launched. Okay.

Yes.

The next question is from the line of Sudarshan from Sundaram Mutual Fund.

Ma'am, just to touch your earlier commentary on the cash flows and debt. I mean if I just do some calculation, I mean for the 9 months itself, we have generated a cash profit of about INR 120 crores, that is PAT plus depreciation. And overall, we have seen like around INR 100 crores increase in sales. That's primarily the first 9 months of FY '20 versus first 9 months of this year. And if I actually go by historical working capital of even 90, 100 days, I would assume that typically we would only require about INR 30 crores to INR 40 crores at best in terms of working capital for this jump. So why is the debt reduction so small? I would assume that the debt reduction should be at least to the tune of about INR 80 crores to INR 100 crores this year? Should have been?

Yes. With the ramp-up in international business, the working capital cycle there is higher than in India. That is one reason. And also, we are reinvesting in some very high-end manufacturing of potent products in R&D. So reduction in debt is not the sole criterion.

Yes. So I mean are we talking about CapEx or OpEx, I mean, in terms of R&D cost?

Both, both. Plus our regular CapEx program is there around INR 50 crores to INR 55 crores per annum.

Okay. Okay. Sure. And what would be the working capital intensity when we look at the U.S. incrementally?

In terms of number of days?

Yes.

U.S. payment cycle happens only once in a quarter. So anything which is supplied, let's say, on 1st April, 10th April, 15th April, you get a payment only on 1st, 2nd to 5th July.

Sudarshan, you can take 15 days increase in working capital cycle as far as U.S. is concerned.

The next question is from the line of Sajal Kapoor from Unseen Risk.

My quick question for you. So historically we have been very efficient in converting our EBITDA to operating cash flows. My expectation is based on the 9 months result, we should be reporting an operating profit of somewhere in the region of INR 230 crores, INR 240 crores for the year ending March. So taking our historic cash conversion, EBITDA to cash, that is, we should be able to report on operating cash flow, net operating cash flow, that is, of somewhere in the region of at least INR 160 crores. Is that a fair ballpark or...?

We lost you in the last part of your question, sorry?

Sundeep, sir, I was saying that we should expect to close the year, March ending that is, this fiscal, somewhere in the region of INR 230 crore, INR 240 crore operating profit. Now looking at our historic EBITDA to cash conversion ratio, we should be able to report net operating cash flows of somewhere in the region of INR 160 crores this fiscal. Is that a reasonable estimate? Or am I off or am I on?

Yes. Yes. Your judgment is right.

Okay. Which means that this should be our best ever year in terms of the net operating cash flow because we have never generated INR 160 crores -- we have not even generated INR 150 crores historically.

Compared to last 3 years, yes.

Yes.

Yes. Correct.

The best year after '15-'16.

No, no. Not even last year. I think even before the U.S. FDA disruption, we never generated INR 150 crores, if my memory serves me right.

Yes, yes. Just let me explain.

Our best year was 2019, which was after the USFD disruption, and we generated INR 132 crores then.

No, no. You have to go back to 2016/'17. We used to have a PAT of over INR 80 crores.

No, not PAT, Aditi ma'am. I'm talking about...

Operating?

Yes, yes, yes.

Okay. Okay.

At operating levels per period?

See what has happened is -- yes, I've got your point. Our commitment in terms of our infrastructure coincided with all the problems. We acquired a plant in Baddi. We expanded Patalganga. We expanded our sterile plant. And this took away a huge amount of internal accruals, and plus we invested out of our long-term borrowings. To get back on our feet, it has taken 3 years. That's what we are trying to tell you. And this year would be the best year in the last 3 years.

Yes. Yes. Correct. No, I've been following Indoco for many, many years, Sundeep sir, so I know with the disruption, the Goa issue and all. My -- yes, so INR 160-odd crore of operating cash flows, our regular maintenance CapEx cannot be more than, what, INR 40 crores, INR 50 crores max?

Yes.

We should be reporting a very healthy amount of free cash this year and going forward, right?

Yes, yes.

I think for growth CapEx and the...

You got it, right, yes. Absolutely.

The next question is from the line of Mitesh Shah from ICICI Direct.

Just a quick housekeeping question, sir. What would be the tax rate for FY '21 and the '22, '23? And the -- how much the deferred tax we have in the book?

Our tax rate is expected to be in the range of 32%, 34%, that is the range. And you're talking about deferred tax or the MAT...

MAT credit.

Yes. MAT credit available is close to about INR 50 crore, INR 55 crore.

So that INR 30 crore, INR 34 crore is for '22/'23 as well? We are opting for the new tax regime?

New tax regime probably will take -- yes, 3 -- third year, it will be new tax regime. So you're right. For another 2 years, we will be still under old regime.

As there are no further questions, I would now like to hand the conference over to Mr. Vishal Manchanda for closing comments.

Thanks, everyone, for taking time out to attend the call. Look forward to see you all over the next quarterly earnings call. Thank you very much.

Thank you. Thank you, everybody, for your active participation. Thanks a lot.

Thank you. On behalf of Nirmal Bang Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.